Earlmist Pty Ltd as the Trustee for the Earlmist Unit Trust and Commissioner of Taxation (Taxation)

[2023] AATA 978

Earlmist Pty Ltd as the Trustee for the Earlmist Unit Trust and Commissioner of Taxation (Taxation) [2023] AATA 978 (28 April 2023)

Division:                  TAXATION AND COMMERCIAL DIVISON

File Numbers:         2015/5810; 2015/5821; 2020/3311; 2020/3312; 2020/3313

Re:Earlmist Pty Ltd as   the Trustee for the Earlmist Unit Trust

Silkchime Pty Ltd as the Trustee for the Silkchime Unit Trust

Heca Nominees Pty Ltd as Trustee for the Cinema City Development Trust

Heca Nominees Pty Ltd as Trustee for the Bayshore Port Melbourne Trust

Heca Nominees Pty Ltd as Trustee for the 60 Market Street Trust

APPLICANTS

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Senior Member Dr M Evans-Bonner

Date:28 April 2023

Place:Perth

The Tribunal affirms the: Earlmist Reviewable Decision; Silkchime Reviewable Decision; Cinema City Reviewable Decision; Bayshore Reviewable Decision; and the Market Street Reviewable Decision.

............................[SGD].................................

Deputy President Bernard J McCabe

CATCHWORDS

GOODS AND SERVICES TAX (GST) – whether creditable acquisitions made  – A New Tax System (Goods and Services Tax) Act 1999 (Cth) – whether Applicants entitled input tax credits of $7.2 million – applications relate to five property developments undertaken by the ‘Westpoint group’ controlled by property developer Mr Norman Carey – Applicants were members of interrelated companies and trusts in the Westpoint group – whether the evidence establishes taxable acquisitions were made by the Applicant entities – tax invoices generated on or around appointment of receivers and managers to the trustee companies of the Applicant – where documentation said to evidence supplies was sometimes inconsistent with evidence of Mr Carey – Applicants had difficulty obtaining documentation seized by Australian Securities and Investments Commission – Applicants’ unable to meet burden of proof in s 14ZZK of the Taxation Administration Act 1953 (Cth) – Reviewable Decisions in all applications affirmed

STAMP DUTY – numerous documents the Applicants sought to rely on were unstamped – whether Applicants can rely on unstamped documents – undertaking letter to Commissioner – issues of provenance and reliability of record-keeping from failure to stamp documents

LEGISLATION

A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 1-2(1), 9-5, 9-15(1), 9-15(1)(a), 9-15(2), 9-20(1)(a), 11-5, 11-10, 11-15(1), 11-20, 11-25, 17-5, 29-10(3), 29-70(1), 35-5(1)

Administrative Appeals Tribunal Act 1975 (Cth) s 33(1)(c)

Judiciary Act 1903 (Cth) s 79

Stamp Act 1921 (WA) ss 27, 27(1), 27(3)

Stamp Duties Act 1923 (SA)

Taxation Administration Act 1953 (Cth) ss 14ZY(1), 14ZYA, 14ZZK

Trustees Act 1962 (WA) ss 7(5), 7(6)

CASES

Australian Securities & Investments Commission v Eastlands Pty LtdACN 009 349 053 (No 3) [2006] FCA 1702

Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd [2004] WASC 241

Australian Securities and Investments Commission, Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 1242

Commissioner of Taxation v Cassaniti [2018] FCAFC 212

Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49

Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614

Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81

Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 22 ATR 148

Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402

Pitman v Johnson [2017] FCA 945

Spassked Pty Limited v Federal Commissioner of Taxation (2003) 136 FCR 441; [2003] FCAFC 282

SECONDARY MATERIALS

Goods and Services Tax Determination GSTD 2004/4 – Goods and Services Tax: can consideration for a supply be provided or received without transferring money (such as where the parties only make book entries recording their agreement that the supply is paid for)?

REASONS FOR DECISION

Deputy President Bernard J McCabe
Senior Member Dr M Evans-Bonner

28 April 2023

OVERVIEW

1. The applications for review were commenced by several surviving members of the failed Westpoint property development group. The Applicant companies claim they are entitled to tax refunds exceeding $7.2 million with respect to five property developments undertaken by the group. The tax refunds are said to be owing because the Applicants are entitled to input tax credits arising on creditable acquisitions from other companies in the group who, undertook work and provided services to the Applicant’s in connection with those property developments. The taxable supplies said to give rise to those creditable acquisitions were recorded in tax invoices issued to the Applicant companies in 2005 and 2006.

2. The Commissioner disagrees with those claims. While the precise reasons differ in each case, he issued nil assessments for each period for each Applicant (apart from one assessment in relation to the Bayshore Port Melbourne Trust, where he assessed a small negative net amount which that Applicant wishes to dispute).

3. The transactions and events at the heart of these proceedings took place many years ago. That presents an evidentiary challenge for the Applicant companies who are required to establish the Commissioner’s assessments were excessive or otherwise incorrect and what the assessment or decision should have been. To this end, the Applicants and the Commissioner provided us with a good deal of documentary evidence. As we shall see, the documentary records were by no means complete. That is not surprising given the events in question happened up to two decades ago, the counterparties to the transactions have long since been liquidated, and many of the group entities were subject to periods of external administration and interventions by the Australian Securities and Investments Commission (‘ASIC’) who seized documents. The Applicant companies sought to supplement (and in some cases qualify or contradict) documents with explanations provided by Mr Norman Carey, the ultimate controller of the Westpoint group of companies, and some other witnesses.

4. The Applicant companies acknowledged they are unable to provide a complete picture of what occurred. They nonetheless insist they provided enough pieces of the jigsaw to establish a factual picture that would enable the Tribunal to be satisfied they were entitled to net amounts – effectively, the refunds – they claimed.

5. After a lengthy hearing and an exhaustive review of the material, we are not satisfied the Applicants have discharged their onus. That means the objection decisions under review must be affirmed and the original assessments stand. We explain our reasons for that conclusion below.

6. We will begin by outlining the issues we must decide before describing the Westpoint group and its modus operandi in general terms. We will refer to the witnesses and introduce Mr Norman Carey, who controlled the group and played a pivotal role in all the developments that were carried on by the Applicant companies. In doing so, we will make general observations about Mr Carey’s evidence. We will then deal with a preliminary issue concerning the use of what were hitherto unstamped documents.

7. Following that introduction, we will discuss the evidence in relation to the individual property developments and the affairs of each Applicant company that are relevant to the issues in dispute and explain our conclusion and reasoning in each case.

   The issue for determination and the relevant law

8. Broadly speaking, the issue for determination by the Tribunal that is common to each application concerns whether the Applicants are entitled to claim input tax credits on taxable supplies referred to in the disputed tax invoices. The answer to this question turns on whether the Applicants made creditable acquisitions from related entities. If they did not make the creditable acquisitions as they contend, they will not be entitled to the refunds which they say are due.

9. To succeed the Applicants must meet the burden in s 14ZZK of the Taxation Administration Act 1953 (Cth) (‘TAA’) of establishing the assessments made by the Commissioner (or treated as having been made by the Commissioner under s 14ZYA of the TAA), are excessive or otherwise incorrect and what the assessment should have been.

10. The operative provisions we must apply are contained in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (‘GST Act’) which commenced on 1 July 2000. The operation of the GST Act was explained by the High Court in Federal Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49, at [3]:

    Under the GST Act, an entity is liable to pay GST on any “taxable supply”, and is entitled to an input tax credit on any “creditable acquisition”. For each tax period applicable to the entity, amounts of GST are set off against amounts of input tax credits to produce a net amount, which may then be subject to adjustments. The net amount, as adjusted, is the amount which the entity must pay to the Commonwealth, or which the Commonwealth must pay to the entity, in respect of the period.

11. There is not much dispute over the applicable law in these proceedings. The dispute in each case is mainly concerned with the facts. For the sake of completeness, we will refer to the principal operative provisions below.

12. GST is payable on a “taxable supply”, which is defined in s 9-5 of the GST Act as follows:

    You make a taxable supply if:

    (a)         you make the supply for consideration; and

    (b) the supply is made in the course or furtherance of an enterprise that you carry on; and

    (c)          the supply is connected with the indirect tax zone; and

    (d)         you are registered, or required to be registered.

    However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

13. Section 11-20 of the GST Act provides:

    You are entitled to the input tax credit for any creditable acquisition that you make.

14. Section 11-25 of the GST Act provides, in part:

    The amount of the input tax credit for a creditable acquisition is an amount equal to the GST payable on the supply of the thing acquired…

15. Section 11-5 of the GST Act, titled, “What is a creditable acquisition?” provides:

    You make a creditable acquisition if:

    (a)         you acquire anything solely or partly for a creditable purpose; and

    (b)         the supply of the thing to you is a taxable supply; and

    (c)          you provide, or are liable to provide, consideration for the supply; and

    (d)         you are registered, or required to be registered.

16. An “acquisition” is broadly defined in s 11-10 of the GST Act. The relevant part provides:

    (1)      An acquisition is any form of acquisition whatsoever.

    (2)      Without limiting subsection (1), acquisition includes any of these:

    (a)  an acquisition of goods;

    (b)  an acquisition of services;

    (c)  a receipt of advice or information; …

17. Section 11-15(1) of the GST Act provides:

    You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

18. Section 9-20(1)(a) of the GST Act provides:

    (1)        An enterprise is an activity, or series of activities, done:

    (a)  in the form of a business;

    …

19. “Consideration” is defined in s 9-15(1)(a) of the GST Act to include:

    any payment, or any act or forbearance, in connection with a supply of anything; …

20. The taxpayer must hold a tax invoice for a creditable acquisition at the time when the GST return is lodged which records the taxable supply. Subsection 29-10(3) of the GST Act provides in part:

    (3) If you do not hold a tax invoice for a creditable acquisition when you give to the Commissioner a GST return for the tax period to which the input tax credit (or any part of the input tax credit) on the acquisition would otherwise be attributable:

    (a) the input tax credit (including any part of the input tax credit) is not attributable to that tax period; …

21. Section 17-5 sets out the method for calculating the net amount, and s 17-10 provides for adjustments to be made to that amount where appropriate. As for refunds, s 35-5(1) provides:

    If the assessed net amount for a tax period is less than zero, the Commissioner must, on behalf of the Commonwealth, pay that amount (expressed as a positive amount) to you.

    The Westpoint group of companies and their modus operandi – and the central role of Mr Carey

22. The Westpoint group of companies commenced business in Perth in 1985. The group developed residential and commercial property projects around Australia before its collapse at the end of 2005. Over its lifetime, the group completed projects worth over $900 million. When it collapsed, the group was in the process of undertaking projects worth over $2.2 billion, and it had around $200 million worth of new projects “in the pipeline” (A1/[11]).

23. By 2005, companies in the Westpoint group directly employed nearly 400 full-time employees. The group companies collectively engaged over 1000 contractors (A1/[56]-[59]). It was a large concern.

24. The Westpoint group was comprised of approximately 157 related corporate entities and trusts (A1/[7]). We were told the group conducted its business according to what became known as Westpoint’s “Integrated Development Process” (A1/[26]). Some of the detail of that process was included in an internal policy document titled ‘Development Management Process and Policies’ (A1/[27], attachment 6). Under that process, the group would identify a project it was considering. It would then establish a company as a ‘special purpose vehicle’ (‘SPV’) to secure the relevant land, most obviously through a conditional contract. The SPV would be responsible for delivering the development once the decision was made to proceed. That decision would typically be made after the feasibility of the project was determined, and after financing arrangements were settled. The financing was often predicated on achieving a certain target of pre-sales which provided some assurance as to the viability of the project (A1/attachment 6 at section 5.0).

25. The SPVs under consideration here did not operate in isolation. Firstly, in each case it was the trustee of a trust. The beneficiaries of the trusts were interests associated with Mr Carey. Second, the SPV engaged with other group companies that provided services in connection with the development as it proceeded through various stages. In particular, the SPV typically contracted with:

    (a)Westpoint Corporation Pty Ltd Pty Ltd (ACN 009 395 751) (‘Westpoint Corporation’), which operated as the central treasury for the entire Westpoint group. Westport Corporation would organise funding for the SPV that was sourced from other group companies known as ‘mezzanine’ companies. Those monies were typically sourced from ‘senior lenders’. (A general description of the group’s approach to financing is set out in the judgment of the Supreme Court of Western Australia in Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd [2004] WASC 241 at [5]ff. Mr Carey acknowledged the accuracy of that account in the course of his supplementary statement dated 26 April 2016 (at TB 014/[22]-[23].)

    (b)Westpoint Constructions Pty Ltd (ACN 009 399 740) (‘Westpoint Constructions’), which carried out the design and construction of the project for the SPV. That entity had a workforce of its own but also engaged contractors who worked on the project.

    (c)Westpoint Realty Pty Ltd (ACN 050 218 954) (‘Westpoint Realty’), which carried out marketing and property management activities in relation to the project.

    (d)In some cases, the SPV also contracted with Westpoint Management Ltd (ACN 074 148 431) (‘Westpoint Management’) which provided management services in connection with the development project.

26. These inter-group arrangements lie at the heart of this case. The Applicant companies argue there is nothing unusual about the arrangements: they say many property developers did business in this way, but the arrangements are even more complicated than they might appear at first glance.

27. One complication in three of the cases under consideration here arises out of the fact the original SPV used to conduct those developments has long since been deregistered. A Carey-controlled company called Heca Nominees Pty Ltd Pty Ltd (ACN 053 581 874) (‘Heca Nominees’) claims to have been appointed an additional trustee to three of the trusts (that is, the Bayshore Port Melbourne Trust, 60 Market St Trust, and the Cinema City Development Trust) while the developments were being carried out. As we shall explain, we are not satisfied the appointments of Heca Nominees as an additional trustee in each case were effective.

28. Another complicating factor was the central role of Mr Carey in the business. We have already explained the group was a large concern: it was not a small business if the number of entities and employees and the size of the turnover are used as measures. Yet at least in some respects, the business was operated very much like a small business – a small business that was dominated by Mr Carey.

29. Mr Carey was the controller of the group and personally oversaw its busy portfolio of projects. In his statement, Mr Carey dwelt on the sophisticated nature of what he described (A1/[28]) as:

    Westpoint’s Integrated Development Process [that] was developed over many years to enable the group to develop medium and high-rise buildings with reduced risks, conflicts, and the use of multiplicity of external experts.

30. While Mr Carey made much of the process that the group routinely followed, he also came to emphasise in his oral evidence the pivotal role he played in the operations of the entire group. In essence, he behaved very much like the owner of a small business who played an active, ‘hands on’ role. He oversaw or was involved in every aspect of the business and made every important decision himself. That central role was reflected in his grandiose job title: he was known as ‘Group Managing Director and Head of the Property Development Business Group’ (A1/[50]). He explained (A1/[51]) his major responsibilities included:

    a)    Initiating all property development projects;

    b)    Overseeing all aspects of project initiation;

    c)    Overseeing all business processes within the Property Development Group;

    d)    Overseeing the management and leadership of each Strategic Business Unit within the Property Development Group;

    e)    Ensuring that each Strategic Business Unit within the Property Development Group achieved the objectives set out in the business plans;

    f)     Overseeing the progress of all property projects; and

    g)    Overseeing all aspects of marketing and sales on each project.

31. While Mr Carey played a pivotal role within the group, he also played a direct role in each of the group companies discussed in these reasons, including Westpoint Corporation, Westpoint Constructions, Westpoint Realty and each Applicant entity. On his evidence, he was directly and intimately involved in most of the intercompany arrangements that we will discuss in relation to each development. In many cases, he was the responsible officer on both ends of the transaction. In some of the cases, he was the only witness to what occurred.

32. All this came to an end when the group collapsed. Mr Carey was thereafter mired in a protracted dispute with ASIC and external managers appointed to the affairs of various companies in the Westpoint group. He was criticised in the media. We will refer to some of the remarks made by the Court which ASIC says reflect on his credit. Many of the group’s companies were subsequently wound up, including some of the SPVs which were established to carry out the developments under consideration here.

33. Mr Carey remains bitter about the circumstances of the collapse. His evidence makes clear that he believes ASIC in particular is responsible for the spectacular demise of what he suggests was an otherwise viable and successful business (see, for example, A1/[18]-[19]).

34. We will return to the evidentiary challenges for the Applicants – particularly those associated with Mr Carey’s evidence - below.

    The essence of the Applicant’s claims

1. The Applicants say they (or perhaps their joint trustees) each made creditable acquisitions when they acquired taxable supplies from Westpoint Corporation, Westpoint Constructions and Westpoint Realty (and from other entities in the group, or entities controlled by interests otherwise associated with Mr Carey) as they developed the individual projects. Those creditable acquisitions were said to give rise to input tax credits that were attributable to the periods under consideration. In each case, the Applicants say they are entitled to substantial refunds once the net amount is calculated.

2. The Applicants claimed their net amounts were substantially less than zero in each case because of what amounted to timing issues in the development process. While a project proceeded but before sales were finalised, the SPV did not routinely make taxable supplies to anyone else. The reason for that is obvious, we were told: the SPV had nothing to sell while the project was still being developed. It was anticipated the SPV would make taxable supplies once the apartments or other properties in the completed project were sold. When that occurred, the SPV would collect the GST that would be remitted to the Commissioner in quarterly periods after the periods under review in this case.

3. In the periods under review before us, while the project in each case was still underway and the SPV was a consumer of services from the other companies, we were told the entitlement of each Applicant to input tax credits resulted in a net amount that would ordinarily result in a refund for the Applicant company. The Applicants say GST collected by the service companies in connection with their taxable supplies to each Applicant was presumably remitted to the Commissioner. If those service companies failed to comply with their obligations to remit GST, that was not the fault of the Applicant in each case. They say such a failure made no difference to their own entitlement to a refund since the Applicant companies were all separate entities.

4. As it happens, the Commissioner was not convinced by the arguments of the Applicant companies. The Commissioner denied each Applicant was entitled to the input tax credits they claimed. As we mentioned above, with one exception, the Commissioner issued net assessments of zero in respect of each period for each Applicant company. (The one exception related to a single period for the Bayshore Port Melbourne Trust, where the Commissioner issued an assessment showing a small negative net amount.)

   The hearing

5. The hearing of these applications took place in two parts over seven days. The first part commenced on Wednesday 3 November 2021 to Friday 5 November 2021. The second part commenced on Monday 15 November 2021 to Thursday 18 November 2021. The Commissioner filed written closing submissions on 9 December 2021. The Applicants filed their written closing submissions in reply on 16 February 2022. We heard oral closing submissions on 22 February 2022.

6. Due to COVID-19 border restrictions, the Tribunal held a ‘blended’ hearing in which some of those involved participated remotely by Microsoft Teams. The Deputy President presided from a Tribunal hearing hub in the Sydney Registry. The Senior Member, witnesses and a representative from each instructing team were physically present in a hearing room in the Perth Registry. Counsel for the Applicant, Mr Sievers, and counsel for the Respondent, Mr Davies KC (with junior Ms Baker), appeared by Microsoft Teams from separate locations in Melbourne. We are satisfied we had ample opportunity to closely observe the witnesses at the hearing. We also had a complete transcription of the entire proceedings which we have referred to throughout these reasons.

7. The following witnesses were called by the Applicants, and three of them were cross-examined:

   (a)Mr Norman Carey, who gave evidence for the first six days of the hearing;

   (b)Mr Gregory Nairn, who previously held roles in the Westpoint group as the Acting Group Financial Controller, General Manager – Special Projects (until his title changed to General Manager – Financial Accounting), gave evidence on day seven of the hearing;

   (c)Ms Samantha Rigg, who was employed as the Western Australia Marketing Officer for Westpoint Realty Pty Ltd (ACN 050 218 954) from May 2003 until 24 January 2006, and who is currently employed by another company owned by Mr Carey called Dalegrove Holding Pty Ltd, also gave evidence on day seven of the hearing.

   (d)Mr Boon (Jimmy) Low was called by the Applicant. His statement was admitted into evidence (as Exhibit A17), and he did not give evidence at the hearing, because the Respondent did not require him for cross-examination. Mr Low, amongst other things, is a company director. He has worked in the real estate industry, including on joint venture projects with the Westpoint group. Mr Boon had introduced high-net-worth Asian clients to the Westpoint group as investors (Exhibit A17, paras [1]-[6]).  

8. A large number of documents were tendered at the hearing and put into evidence. We have set out those documents in Annexure A to these reasons.

   The evidentiary challenge

9. We are not in a position to comment on the merits of Mr Carey’s larger complaint about the circumstances of the group’s demise and the role of ASIC in that demise. The history of Mr Carey’s stewardship of the Westpoint group that we have recounted is nonetheless relevant insofar as it helps explain the evidentiary challenge the Applicants face in these proceedings. They are required to effectively reconstruct what occurred in sufficient detail to persuade us the assessments are excessive or otherwise incorrect and what the assessment should have been. As we mentioned above that obligation arises out of s 14ZZK(b) of the TAA. As we shall explain, the reconstruction process was a challenge in the unusual circumstances of this case.

10. Many authorities discuss the taxpayer’s obligation under s 14ZZK(b) of the TAA. The taxpayer’s onus was the subject of extensive written and oral submissions by the parties in these proceedings. Each referred to the oft-quoted passages in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 per Mason J and Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 624 per Brennan J.

11. The principles were not really in dispute, but their application to the facts of the dispute here was contentious because the Applicants’ case depended on the evidence of Mr Carey. Mr Carey’s evidence was proffered to give context to the documents and to fill in gaps or explain the absence of documents. He was also asked to qualify or explain why some of the longstanding documents did not mean what they appeared to say or signify, and he sought to provide other explanations or introduce additional documents that buttressed the Applicants’ case.

12. The Commissioner argued we should treat Mr Carey’s evidence with caution because it was (a) self-serving, given Mr Carey was ultimately a beneficiary of the trusts in question, and (b) uncorroborated and occasionally contradicted by the documentary evidence. In doing so, the Commissioner relied on the well-known observations of Hill J in Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 22 ATR 148 regarding self-serving statements. In that case, his Honour suggested (at 155):

    It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed.

13. In the course of his reasons, his Honour referred to the remarks of Fullagar J in Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 who said the evidence of such a witness “must be tested most closely, and received with the greatest caution” (at 403).

14. The Commissioner also referred to the observations of Gyles J in Spassked Pty Limited v Federal Commissioner of Taxation (2003) 136 FCR 441; [2003] FCAFC 282. In that case, Spassked Pty Limited was a wholly owned subsidiary in a large corporate group. It claimed deductions in respect of interest it incurred on amounts advanced to the entity by another company in the group. The primary judge concluded the interest payments were not an allowable deduction. Hill and Lander JJ wrote a joint judgment that affirmed the conclusion. In a separate judgment, Gyles J adopted their reasoning and added an observation about the evidentiary challenge faced by entities within a corporate group that made claims arising out of intragroup arrangements. His Honour suggested there was no doubt the taxpayer would be entitled to a deduction for the interest payments in that case if the advances in question were made by a third party at arms’ length – but they were not. He referred to the “inherently variable nature of those [intra-group] arrangements” and explained (at [128]):

    The same principle does not apply to purely intra-group arrangements with no external aspect. All of the relevant arrangements were between companies with the same beneficial ownership. Many of the companies involved, including Spassked, had no external role at all. The arrangements involving those companies were inherently variable at the will of the ultimate board of directors. They do not reflect the exercise of business judgment in the relevant sense. Thus, the requisite connection or relationship between the outgoing and the earning of assessable income is not to be inferred but must be positively established. The trial judge found that that had not been done. I agree. …

15. The Applicants in this case questioned the relevance of the decision in Spassked given it was concerned with deductions, but we think the observations of Gyles J have a more general application. Companies – even wholly-owned subsidiaries in a corporate group – are still separate legal entities, and their interactions have legal consequences. They also have taxation consequences which may favour the taxpayer when the relationships are carefully structured. Where two parties interact at arms’ length, the interaction can typically be observed from at least two perspectives that can be compared. The freedom of a taxpayer to modify the relationship and incidentally adjust the taxation consequences is limited by the presence of an unrelated counterparty. But where the relationships are between members of a group, and decisions about the relationship and how it might be varied are made by one person who effectively negotiates with himself without anyone else present, careful scrutiny is justified. A corporate group is not a ’black box’, and intra-group dealings are not entirely shielded from scrutiny, but “the inherently variable nature of those relationships” is a challenge – particularly where the individual who makes the decision:

    (a)  Is the ultimate beneficiary of any arrangement or variation;

    (b)  Is the ultimate authority and dominant personality within the group who is accustomed to making decisions without reference to others;

    (c)   Does not have a track record of observing legal technicalities and requirements, such as submitting documents that have been created to state revenue authorities for stamping.

16. Those observations apply to Mr Carey and the affairs of the Applicants. As we shall see, there are instances where he referred to unwritten agreements (for example, transcript/281 and 285), or variations to agreements (for example, transcript/318), that he effectively negotiated with himself. There were also several instances where Mr Carey claimed to have a special insight into the meaning of a document or agreement that otherwise spoke for itself: for example, when he was challenged during cross-examination on his evidence about incurring expenses under the terms of any agreement, he responded (transcript/315):

    Well, I was a party to the agreement. I understood what that agreement meant. And that’s the basis on which I acted.

17. That answer was consistent with what might be described as a theme in Mr Carey’s evidence. He presented himself as being at the very centre of a large, successful and fast-moving business that relied on his personal skills, and which he drove using the force of his personality. He did not necessarily have time (or, apparently, the inclination) to carefully record every interaction, or document every decision or agreement, and it is not clear that he regarded himself as being bound by any of these internal arrangements in any event. When challenged during cross-examination about his decision-making style (or the adequacy of the record-keeping or documentation), he tended to respond with some version of the answer he gave at transcript/280, which was: “that’s the way things were done”.

18. We have no reason to doubt Mr Carey ran the business in this way, but that underlines the cautionary note we say can be derived from the reasoning of Gyles J in Spassked. 

19. Hill J acknowledged in Imperial Bottleshops (at 155) that “the evidence of a taxpayer is not to be regarded as ‘prima facie unacceptable’”. We should make clear we do not approach Mr Carey’s evidence on the basis it is “prima facie unacceptable” or inherently unbelievable, even as we say it must be scrutinised with care. We acknowledge Steward J pointed out in Commissioner of Taxation v Cassaniti [2018] FCAFC 212 that cautionary advice to the effect that a taxpayer’s self-serving evidence must be scrutinised with care must not have the effect of transforming the taxpayer’s onus under s 14ZZK(b) into a “special burden of proof” which makes the taxpayer’s challenge even more difficult. Steward J laid out a series of propositions (at [88]) which bear repeating:

    (1) first, where the onus is on the taxpayer (whether pursuant to s 14ZZO of the TAA or otherwise) the degree or standard of proof required is that which ordinarily applies in civil proceedings. The direction given to a jury in civil cases aptly describes that onus by reference to a pair of scales and to the arguments of each party being placed at each end. As Hunt J said in Allied Pastoral:

    ...if the plaintiff succeeds... in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries...

    (2)  secondly, for that purpose it is not obligatory for a taxpayer, in order to discharge his burden of proof, to call all material witnesses and to produce all material documents which support her or his or its position;

    (3)  fourthly, there is no requirement that evidence can only be accepted as admissible and probative if it is corroborated;

    (4)  fifthly, the tribunal of fact is free to accept the evidence of the taxpayer alone if it finds the taxpayer to be truthful;

    (5)  finally, it would usually be prudent to corroborate the evidence of a taxpayer. It is also prudent to adduce contemporaneous objective evidence. But prudence should not be confused with the requirements of the law.

20. We accept Mr Carey’s account of the way in which the group did business, and we have no difficulty with his claim that he played a central role in the events which were the subject of these proceedings. It follows we accept Mr Carey was clearly in the best position of anyone to know what was going on in the Westpoint group and the affairs of the individual taxpayers. His evidence is potentially valuable to that extent. He is obviously an intelligent man, and he appeared to have an impressive recall of detail – indeed, he exhibited a level of conviction in his recollection that was remarkable given the events he was recounting occurred up to two decades ago.

21. On the other hand, as we shall explain, we are also satisfied:

    (a)As the ultimate beneficiary of the claims we are considering, Mr Carey has much to gain if his evidence is accepted;

    (b)Mr Carey clearly has a sense of grievance that arises out of the circumstances of the collapse and the lengthy proceedings involving ASIC and the external managers. While we do not have enough evidence to say he may regard success in these proceedings as a partial vindication of his reputation, his evidence was obviously informed by his bitter and indignant recollection of how he perceives he was treated;

    (c)Mr Carey has given evidence in Federal Court proceedings that appears to be inconsistent with the evidence he gave before us in at least one respect;

    (d)Mr Carey was not given to careful compliance with legal obligations, like the obligation to stamp documents. The failure to stamp documents in accordance with the law was particularly unfortunate in circumstances where Mr Carey relied on documents that he said were created years ago. There is limited evidence of that in circumstances where one would have expected there to be, if only because the documents should have been submitted for stamping in a timely way if they had been created as he described;

    (e)Mr Carey was not given to respecting the realities of the separate legal personalities of the different companies in his group: while he obviously understood it was necessary for the group to be seen to be structured using different entities and to document relationships between them, he did not appear to let that intrude on his free-wheeling style of management in practice. His decision-making style might call into question his detailed recollection of events, agreements or documents when he did not appear to have careful regard to those things in practice;

    (f)In one instance, Mr Carey and another witness, Mr Nairn, who was called to corroborate his account relied on a document that appears to have been “doctored”, to use the Commissioner’s description. We did not conclude Mr Carey or Mr Nairn were responsible for the tampering, but the fact multiple versions of the same document were in circulation and being relied on without proper explanation for the difference does not reflect well on the quality of the witnesses’ recollection or the integrity of the documentary evidence;  

    (g)The events in question occurred a long time ago, and it is notorious that the recollection of witnesses becomes suspect over time – especially where the events being recollected may be clouded by high emotions; and

    (h)Mr Carey’s recollections are often inconsistent with the documents provided by the Applicants and with documents sourced from ASIC and external managers. Mr Carey sought to explain away some of the discrepancies between his own recollections and those apparent from documents obtained from ASIC and the external receiver/managers and liquidators by suggesting those external parties were labouring under an insufficiency of evidence, but that is impossible to verify now (especially in circumstances where those external parties were not called as witnesses).  

22. The Commissioner argued Mr Carey was not a witness of truth and submitted we should discount or wholly reject his evidence on that basis. We are not satisfied he was being deliberately untruthful where there were discrepancies in his evidence. Having said that, our ability to discern whether Mr Carey was being honest or untruthful was complicated by the state of the evidence as a whole and the passage of time. At one level that is unsurprising: whatever the quality of the record-keeping within this large and complex group when it was operating, the documentary evidence and the recollection of available witnesses has almost inevitably been degraded through the passage of time and the intervention of ASIC and external receivers and managers, as well as liquidators. The protracted litigation involving ASIC and those external parties in the immediate aftermath of the Westpoint group’s collapse suggests it was hard enough for the Court to work out what transpired within the group; the evidence available to us a decade later is in an even less satisfactory state.

1. Given the factors peculiar to this case that we have identified and given the question marks that arise over Mr Carey’s evidence – most obviously because of the discrepancies we identify but also because of our concerns about the factors which may affect the quality of his recollection of events occurring a long time ago - we are not satisfied we can accept Mr Carey’s evidence at face value.

2. The Commissioner attempted to reconstruct what occurred with the documentary building blocks at his disposal. He says the totality of the documents available in the proceedings do not establish the reality the Applicants describe. The Commissioner says we cannot trust the selection of documents relied upon by the Applicants and that we cannot trust Mr Carey’s version of events to the extent it qualified or contradicted the full range of documents or purported to fill in gaps. The Commissioner says the documents relied upon by the Applicants are not sufficient because they are incomplete and contain errors. The Commissioner also highlights the fact there are no records from the supplying entities which might have corroborated claims. The financial records of the Applicants which purport to show set-offs, such as they were, contradict reports as to affairs produced by the managers, receivers and/or liquidators of the other entities. The Commissioner submitted some of the documents are unhelpful to the Applicants in any event because they do not make clear precisely what work was done and for whom. The Commissioner also raised concerns about the provenance of some of the documents that Mr Carey relied upon, particularly those produced following requests by the Commissioner or after these proceedings were commenced, and one of which appears to have been deliberately altered. The Commissioner also argues the Applicant in several of the applications (Heca Nominees), was not properly appointed as a trustee of the relevant trusts and is not entitled to anything in any event.   

3. The Commissioner says the totality of the evidence does not describe the relationships and transactions that lead to the taxation consequences for which Mr Carey contends. After doing our best to reconstruct what occurred from thousands of pages evidence and the transcript of a lengthy hearing – a laborious process that took much longer than anticipated – we are not satisfied the Applicants have discharged their onus.

4. These proceedings presented like a large and complex jigsaw puzzle that we were required to assemble without reference to the picture on the box – and without access to all the pieces. The Applicants relied on Mr Carey to qualify or explain the placement of many of the documentary pieces that were available, and to fill in gaps. In doing so, the Applicants aimed to assemble enough pieces to satisfy us that the final image was more or less as they contended. Having reviewed all the material with care, we do not think they have succeeded in that endeavour.

   A PRELIMINARY ISSUE – DEALING WITH UNSTAMPED DOCUMENTS

5. Before we turn to the substance of the dispute, we should address a preliminary issue that was raised by the Commissioner in advance of the hearing. It concerned the Applicants’ use of unstamped documents. The Applicants took issue with the Commissioner doing so (Applicant’s closing submissions in reply, para [165]) but agreed to address the problem.

6. The documentation relied upon by the Applicants, including agency agreements, loan agreements, and design and construct contracts were mostly unstamped. It appears from the documentation before us that there was a habitual practice on the part of the Westpoint group, which included the Applicants and related entities, of failing to submit documents to the Office of State Revenue and to pay duty. That is a problem because s 27(1) of the Stamp Act 1921 (WA) (‘Stamp Act’) provides:

   Except as otherwise provided by a stamp Act no instrument chargeable with duty and executed in Western Australia, or relating, wheresoever executed, to any property situate or deemed to be situate or to any matter or thing done or to be done in Western Australia, shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless it is stamped in accordance with the law in force at the time when it was first executed.

7. The Applicants drew our attention to Pitman v Johnson [2017] FCA 945. In that decision, Charlesworth J found s 79 of the Judiciary Act 1903 (Cth) (‘Judiciary Act’) applied to “pick up” an equivalent section of the Stamp Duties Act 1923 (SA) as “a law that is binding on this Court”. Section 79 of the Judiciary Act relevantly provides:

   State or Territory laws to govern where applicable

   (1)The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

8. We accept the Tribunal is not a Federal Court. It is part of the Executive. We also acknowledge s 33(1)(c) of the Administrative Appeals Tribunal Act 1975 (Cth) provides:

   (1)     In a proceeding before the Tribunal:

   …

   (c) the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate.

9. If the Applicants are right, it may be that we could have regard to the unstamped documents although the question of weight would still need to be decided.

10. As it happens, we are satisfied we do not need to reach a concluded view on this issue because, on 12 November 2021, the Applicants’ legal representatives lodged 23 documents the Applicants were seeking to rely on in these proceedings (including loan agreements, deeds of appointment of additional trustees, and a sale of land agreement) with the Commissioner of State Revenue for the assessment of stamp duty. The documents were lodged pursuant to the exception in s 27(3) of the Stamp Act which refers to the documents being lodged on behalf of a party who is “not being a person who is liable to pay the duty”.

11. Subsequently, on 15 February 2022, the Applicants’ legal representatives also lodged three trust deeds which they stated, “were not previously assessed due to an oversight by our client” (see letter attached to Annexure G, Applicant’s closing submissions in reply). 

12. Given the documents sought to be relied upon by the Applicants have now been lodged for the assessment of stamp duty, we accept it would be appropriate for us to have regard to them – although as we shall see, the failure to stamp the documents in accordance with the law creates other more practical challenges and reflects on the integrity of the record-keeping by the Applicants and the Westpoint group. Those concerns have implications for the weight we accord the documents but does not affect their admissibility.

    EARLMIST TRUST

    The entity

13. According to Mr Carey, the Earlmist Unit Trust (‘Earlmist Trust’) was established on 12 December 1996 to develop the Warnbro Fair Shopping Centre and other associated developments (A1/[86] and [88]).

14. Earlmist Pty Ltd (ACN 069 056 926) (‘Earlmist Company’) was the Trustee of the Earlmist Trust at all relevant times.

15. We will refer to the Applicant entity, Earlmist Pty Ltd as Trustee for the Earlmist Unit Trust, as ‘Earlmist’.

16. Since 30 June 1997 Mr Carey was the sole Director of the Earlmist Company. Mr Graeme Rundle was the Company Secretary from 30 June 1997 to 27 January 2006 and Mr William Dodd was the Company Secretary from 28 October 2003 to 14 June 2004. The shareholders were Mr Carey and Heca Nominees. Mr Carey was the Director and the shareholder of Heca Nominees from 1 October 1991. Mr Rundle was the Company Secretary of Heca Nominees from 30 June 1997 to 27 January 2006 (TB 006.32; 031.A8).  

17. Mr Carey was the “ultimate beneficiary” of the Earlmist Trust (A1/[87]).  

18. Mr Mark Korda and Mr Oren Zohar were appointed as receivers and managers of the Earlmist Company on 29 March 2006. The appointment ceased on 14 March 2011 (TB 006.32).

    The assessments

19. Earlmist was registered for GST from 1 July 2000 (TB 006.33) and accounted for GST on a non-cash monthly (accruals) reporting basis (TB 006.10, pdf 7; A1/[86]). 

20. On 13 November 2012, Earlmist lodged business activity statements (‘BAS’) claiming it made creditable acquisitions totalling $8,040,175 in December 2005 and January 2006. Specifically:

    (a)A BAS for the tax period 1 December 2005 to 31 December 2005 in which Earlmist claimed it was entitled to a refund of $419,650. The claim for a refund was made on the basis Earlmist was entitled to input tax credits in relation to non-capital purchases of $4,616,150 made in that month (TB 006.3, pdf 1-2).

    (b)A BAS for the tax period 1 January 2006 to 31 January 2006 in which Earlmist claimed it was entitled to a refund of $311,275. This claim for a refund was made on the basis Earlmist was entitled to input tax credits in connection with non-capital purchases of $3,424,025 made in that month (TB 006.4, pdf 1-2).

21. Thus, the total refunds claimed by Earlmist was $730,925.

22. Following the lodgement of these BASs, the Commissioner initiated a review. This was perhaps due to the following circumstances which had the appearance of being irregular:

    (a)Prior to the periods in these BASs, Earlmist’s largest claim for input tax credits was a claim for $8,596 for the tax period 1 June to 30 June 2005 (TB 006.5, pdf 2).

    (b)Both BASs related to periods before the receivers and managers of the Earlmist Company were appointed and yet the BASs were lodged the year after the receivers and managers of the Earlmist Company ceased their appointment. We note Mr Carey says no BASs were lodged for December 2005 and January 2006 because they were prepared by external accountants whose appointment was terminated on 24 January 2006 when receivers and managers were appointed to eight entities in the Westpoint group. Further, Mr Carey says ASIC seized all books, records and documents for those entities, including those of the Earlmist Trust (A1/[90]).

23. On 22 November 2012, the Commissioner decided to revise the BASs to nil, on the basis that Earlmist was not entitled to any input tax credits nor owed any refunds (TB 006.7). The Commissioner issued new notices of assessment to that effect (TB 006.8; TB 006.9).

    The Reviewable Decision

24. Earlmist made a late objection to the new notices of assessment on 15 August 2014 (TB 006.10). After being informed by the Commissioner that the objection was out of time (TB 006.11), Earlmist’s tax advisors made submissions asking for the Commissioner to exercise his discretion to allow the late lodgement on 29 August 2014 (TB 006.12).

25. The Commissioner requested further documentation on 25 September 2014 (TB 006.14), 6 November 2014 (TB 006.16), 25 November 2014 (TB 006.18) and numerous documents were provided by Earlmist’s tax advisors on 31 October 2014 (TB 006.15), 21 November 2014 (TB 006.17), 18 December 2014 (TB 006.19) and 2 February 2015 (TB 006.20).

26. When Earlmist’s tax advisors followed up the Commissioner on 4 March 2015, they were told the Commissioner was trying to verify the transactions in the records provided with ASIC (TB 006.21). In a letter to ASIC dated 29 April 2015, the Commissioner sought information concerning the Westpoint group of entities (TB 006.22).

27. Earlmist’s tax advisors had not received an objection decision and so on 4 September 2015 they submitted a notice under s 14ZYA of the TAA stating they had provided all the requested information and requiring the Commissioner to make a decision within 60 days otherwise, as per s 14ZY(1) of the TAA, the Commissioner would be taken to have made a decision to disallow the taxation objection (TB 006.25).

28. On 29 September 2015 the Commissioner granted an extension of time (TB 006.27).

29. The Commissioner did not make a decision within 60 days of the s 14ZYA notice (that is, by 3 November 2015) and so was taken to have disallowed the objection. We will refer to this as the ‘Earlmist Reviewable Decision’.

30. On 5 November 2015, Earlmist sought review of the Earlmist Reviewable Decision in this Tribunal (TB 006.1).

    The tax invoices

31. In Earlmist’s objection of 15 August 2014, it was stated that Earlmist operated a “property development enterprise” and that it was involved in two projects which were summarised as follows (TB 006.10/55):

    Project 1 – Warnbro Commercial Centre

    This project included the development of a service station incorporating a convenience centre, a fast food outlet, 2 retail shops and adjacent car parking.

    The tenancies were to be leased and sold on a strata-titled basis on completion.

    Project 2 – Expansion of Warnbro Fair Shopping Centre

    The project included the extension and redevelopment of Warnbro Fair Shopping Centre that involved the design and construction of a BIG W store and so specialty retail stores including the integration of the existing shopping centre and new under croft parking.

32. The objection continued to explain Earlmist engaged two related companies, Westpoint Constructions “to design and construct the project” and Westpoint Realty “to carry out the marketing, selling and or/leasing of the project” (TB 006.10, pdf 8).

33. Mr Carey was the Director of Westpoint Constructions and a Company Secretary from 19 July 1989 to 10 March 2012. There were other Directors from time to time until 27 August 2002. Mr Rundle was a Company Secretary from 30 June 1997 to 27 January 2006 (006.40, pdf 3-4).

34. Mr Carey was a Director of Westpoint Realty and a Company Secretary from 1 November 1991 until 29 October 2015. There were other Directors from time to time until 27 February 2006. Mr Rundle was a Company Secretary from 30 June 1997 to 27 January 2006 (TB 006.42, pdf 3-4).

35. The following table was provided by Mr Carey’s tax advisors to explain the interrelationship of the ‘Westpoint entities’ for present purposes. The full names of the entities have been used for clarity:

Entities	Directors/Trustee	Unit holder, Beneficiary or Shareholders
Earlmist Unit Trust	Earlmist Pty Ltd	Quartz Nominees Pty Ltd ATF the Quartz Trust
Earlmist Pty Ltd	Mr Norman Carey	Heca Nominees Pty Ltd and Mr Norman Carey
Heca Nominees Pty Ltd	Mr Norman Carey	Mr Norman Carey
Westpoint Constructions Pty Ltd	Mr Norman Carey	Heca Nominees Pty Ltd and Mr Norman Carey
Westpoint Realty Pty Ltd	Mr Norman Carey	Quartz Nominees Pty Ltd ATF the Quartz Trust
Westgem Unit Trust	Westpoint Realty Pty Ltd	Quartz Nominees Pty Ltd ATF the Quartz Trust
Quartz Trust	Quartz Nominees Pty Ltd	Mr Norman Carey

1. The following tax invoices, all dated 20 December 2005 and issued to the Earlmist Company, were relied upon for the tax period 1 December 2005 to 31 December 2005 (TB 006.10, pdf 123-126):

   (a)“Tax Invoice – number 0645 – 01, Warnbro Commercial Land” issued by Westpoint Constructions in the sum of $1,479,500 for “value of work completed to date” including GST of $134,500.

   (b)“Tax Invoice – number 0694 – 01, Warnbro Shopping Centre – Stage 2 Land” issued by Westpoint Constructions in the sum of $1,595,000 for “value of work completed to date” including GST of $145,000.

   (c)Tax invoice numbered “084-01” issued by Westpoint Realty as Trustee for the Westgem Unit Trust (‘Westpoint Realty ATF Westgem’) for “Warnbro Commercial Land, Marketing, Selling, Leasing and Administration Fees” in the sum of $720,500 including GST of $65,500.

   (d)Tax invoice numbered “082-01” issued by Westpoint Realty ATF Westgem for “Warnbro Shopping Centre – Stage 2 Land, Marketing, Selling, Leasing and Administration Fees” in the sum of $821,150 including GST of $74,650.

2. The following tax invoices issued to the Earlmist Company were relied upon for the tax period 1 January 2006 to 31 January 2006 (TB 006.10, pdf 127-130):

   (a)“Tax invoice – number 0645-02, Warnbro Commercial Land” dated 14 January 2006 issued by Westpoint Constructions in the sum of $984,775 for “value of work completed to date” including GST of $89,525.

   (b)“Tax Invoice – number 0694 – 02, Warnbro Shopping Centre – Stage 2 Land” dated 14 January 2006 issued by Westpoint Constructions in the sum of $1,218,800 for “value of work completed to date” including GST of $110,800.

   (c)Tax invoice numbered “082-02” issued by Westpoint Realty ATF Westgem dated 16 January 2006 in the sum of $578,050 for “Warnbro Commercial Land, Marketing, Selling, Leasing and Administration Fees” including GST of $52,550.

   (d)Tax invoice numbered “084-02” issued by Westpoint Realty ATF Westgem dated 16 January 2006 in the sum of $642,400 for “Warnbro Shopping Centre – Stage 2 Land, Marketing, Selling, Leasing and Administration Fees” including GST of $58,400. 

   Documentation relied upon by Earlmist

3. We will provide an overview of the documentation relied upon by Earlmist to establish it made creditable acquisitions from Westpoint Constructions and Westpoint Realty ATF Westgem.

4. All the contracts and agreements relied upon were signed by Mr Carey as Director and Mr Rundle as Company Secretary of each entity.

5. However, first we note a letter from Mr Carey dated 3 September 2009 to the Deputy Commissioner of Taxation (TB 006.10, pdf 152). The letter stated:

   We confirm that receivers were appointed without warning to the abovementioned entity on 29 March 2006. Both ASIC and the receivers have taken the entities books and records and refuse to return them or provide access.

   As a result we were unable to complete the lodgement of the BAS returns for the periods 1^st – 31^st December 2005, 1^st – 31^st January, 1^st – 28^th February and 1^st- 28^th March 2006, the period before the appointment of receivers.

   We provide notice that substantial GST refunds are due for these months.

   We are unable to complete the lodgement for these months until we gain access to the necessary books and records.

   We will complete the lodgement as soon as possible.

   ...

6. The Commissioner claims to have no record of receiving this letter. However, there is a statutory declaration dated 24 July 2014 from Toni Gray who stated she was working as a part-time executive assistant to Mr Carey. She said she remembered typing the letter from a handwritten draft prepared by Mr Carey. She said she prepared similar letters for other Westpoint entities that had gone into receivership or administration. The letters were prepared from a handwritten schedule that was provided to her by Mr Carey. Ms Gray said she remembers Mr Carey signing the letters, and she recalled the letters being posted the same day (TB 006.10, pdf 149-150). Ms Gray was not called as a witness. We have no reason for doubting her evidence as far as it goes. The letter is consistent with Mr Carey’s claim that he could not complete the BASs because ASIC and the receivers had seized the books and records and would not give him access – although as we shall see that claim is not necessarily persuasive. The evidence also demonstrates Mr Carey’s contemporaneous view in 2009 that “substantial refunds” were due to Earlmist. However, the evidence does not of itself demonstrate whether creditable acquisitions were made by Earlmist, or by anyone else, nor does it demonstrate what (if anything) was actually supplied.

   Documents said to establish taxable supplies were made by Westpoint Constructions

7. Firstly, Earlmist relies upon two building and construction contracts that were given to the Commissioner with the objection. The contracts were apparently adapted from a common template and were named ‘Design & Construct Contract – Lump Sum’. The agreements were said to establish taxable supplies were made by Westpoint Constructions to Earlmist (TB 006.10).

8. These contracts were:

   (a)A contract we will refer to as the ‘Warnbro Fair D & C Contract’ that was executed on 22 September 2005 (TB 006.10, pdf 58) for a contract sum of $31,964,000 to perform the following works for the Warnbro Fair Shopping Centre located in the City of Rockingham (Schedule 1, pdf 89):

   Extension and redevelopment of Warnbro Fair Shopping Centre that involved the design and construction of a Big W store and 50 specialty retail stores including the integration of the existing shopping centre and new undercroft car park

   These works were to be performed on the land more particularly described as (pdf 92):

   Lot 909 on Diagram 94372 together with a right of carriageway over the portion of Lot 908 on Diagram 94372 as set out in Easement G674900, Certificate of Title Volume 2121 Folio 890 and Lot 913 on Diagram 94372, Certificate of Title Volume 2121 Folio 888 at Warnbro in the City of Rockingham

   (Our emphasis.)

   (b)A contract we will refer to as the ‘Warnbro Commercial D & C Contract’ that was executed on 2 October 2005 (pdf 19) for a contract sum of $6,254,640 to perform the following works for the Warnbro Commercial Centre (also referred to in the documentation as the Warnbro Commercial Land) (Schedule 1, pdf 50):

   Design and construction of a Service Station incorporating:

   Convenience centre

   Fast food outlet

   2 retail shops

   Car parking

   These works were to be performed on the land more particularly described as the land located at (pdf 53):

   Lot 915 on Diagram 95368, Certificate of Title Volume 2104 Folio 929, Lot 914 on Diagram 95368, Certificate of Title Volume 2110 Folio 656 and Lot 911 on Diagram 94372 at Warnbro in the City of Rockingham

   (Our emphasis.)

1. The Warnbro Fair Shopping Centre lots and the Warnbro Commercial Centre lots were subdivided from the ‘Original Warnbro Land’ which was described as “estate in fee simple in portion of Cockburn Sound Location 16 and being part of Lot 2004 on Plan 19149, delineated on the map in the Third Schedule hereto” in a certificate of title, volume 2041, folio 469 (TB 006.17, pdf 10). That certificate of title was subsequently cancelled when the land was subdivided, as we explain below.

2. Mr Carey’s evidence was that the development of lot 909 was referred to as “Stage 1”, and the development of lot 913 was referred to as “Stage 2”, of the Warnbro Fair Shopping Centre development. The development applications and contracts for Stage 2 referred to both lots 913 and 909 because the Stage 2 work was intended to be an extension of the Warnbro Fair Shopping Centre constructed on lot 909 (transcript/107).  

3. In his witness statement dated 5 July 2021, Mr Carey referred to another agreement. This was an agreement dated 14 August 1997 between Earlmist and Westpoint Constructions (‘1997 Contract’) under which the latter was contracted to carry out subdivision works including design, demolition, earthworks, siteworks, footings and provision of services such as electricity, gas and sewerage (TB 015.1, pdf 9-21). That is, the 1997 Contract concerned the subdivision of the Original Warnbro Land.

4. For the Warnbro Fair Shopping Centre development, Earlmist also relies upon two documents named, ‘progress payment – construction works summary, Warnbro Fair Shopping Centre – Stage 2 Land’ to substantiate taxable supplies that were made to it. We will collectively refer to these as the ‘Construction Works Summaries – Stage 2’. These showed progress payments:

   (a)For works up to 20 December 2005 with “this payment value” being a total of $1,595,000, marked progress claim number 1 (TB 013.20); and

   (b)For works up to 14 January 2006 with “this payment value” being a total of $1,218,800, marked progress claim number 2 (TB 013.21).

5. For the Warnbro Commercial Land development, Earlmist also relies upon two documents named, ‘progress payment – construction works summary, Warnbro Commercial Land’. We will collectively refer to these as the ‘Construction Works Summaries – Commercial’. These showed the following progress payments:

   (a)For works up to 20 December 2005 with “this payment value” being a total of $1,479,500, marked progress claim number 1 (TB 013.18); and

   (b)For works up to 14 January 2006 with “this payment value” being a total of $984,775, marked progress claim number 2 (TB 013.19).

   Documents said to establish taxable supplies were made by Westpoint Realty

6. Earlmist relies on the following ‘Agency Agreements’ between Earlmist (Principal) and Westpoint Realty ATF Westgem (Agent) to substantiate taxable supplies were made to Earlmist (TB 006.10). These were given to the Commissioner with Earlmist’s objection:

   (a)‘Agency Agreement’ dated 20 July 2005 (pdf 110) whereby Earlmist appointed Westpoint Realty “to market, sell and lease” the properties in the Warnbro Fair Shopping Centre Stage 2 development (lots 909 and 913) for an initial 36-month term and for a commission of 10% of the contract price of the property (clause 2.1, 5.1, Annexure B, pdf 112-117).

   (b)‘Agency Agreement’ dated 17 August 2005 whereby Earlmist appointed Westpoint Realty in the same terms to the 20 July 2005 Agency Agreement for the Warnbro Commercial Land (lots 911, 914 and 915), however Annexure B is missing (pdf 97).

7. Earlmist also relies upon property management services agreements to substantiate taxable supplies were made to Earlmist by Westpoint Realty (TB 006.19). We collectively refer to these as the ‘Management Agreements’. These were given to the Commissioner on approximately 18 December 2014. Both agreements have the same terms, but one is for Stage 2 of the Warnbro Fair Shopping Centre and the other is for the Warnbro Commercial Centre:

   (a)‘Property Management Service Agreement, Warnbro Fair Shopping Centre Stage 2’ made on 20 July 2005 whereby Earlmist appointed Westpoint Realty to carry out management services at Warnbro Fair Shopping Centre (pdf 75).

   (b)‘Property Management Service Agreement, Warnbro Commercial Centre’ made on 17 August 2005 whereby Earlmist appointed Westpoint Realty to carry out management services at Warnbro Commercial Centre (pdf 56).

8. Under the agreements, Earlmist appoints Westpoint Realty as the “sole manager and agent for the purpose of managing the Property” (clause 1).

9. Westpoint Realty was given powers under the agreements to undertake management services including negotiating agreements to lease, negotiating leases and licences, negotiating rent reviews, instructing, or engaging contractors, lodging applications or objections in relation to decisions pending or made by any competent authority in relation to the property, and making and prosecuting claims for insurance (clause 3.1).

10. Westpoint Realty’s duties under the Management Agreements included enforcing all agreements to lease, leases and licences and carrying out rent reviews; engaging and supervising contractors; establishing and maintaining records; instructing solicitors to prepare leasing documentation; maintaining insurances; and inspecting and arranging cleaning and maintenance, along with other duties associated with the efficient management of the property (clause 3.2).

11. In particular Westpoint Realty was responsible for:

    (a)Financial management duties including calculating outgoings and rent and pursuing overdue monies (clause 3.2.1).

    (b)Reporting and budgets including various monthly reports and providing an income and operating budget and business plan (clause 3.2.2).

    (c)Marketing and leasing the property and ensuring rental income was maximised and vacancies minimised (clause 3.2.3).

    (d)Day to day operation and maintenance of the property (clause 3.2.4).

12. Under the Management Agreements, Earlmist was required to pay to or reimburse Westpoint Realty the following amounts (clause 4):

    (a)A monthly management commission comprising 5% of gross income (clause 4.1; Reference Schedule, item 4(1)).

    (b)Leasing fees for new tenants of 12% of the first term gross income and leasing fees for existing tenants of 6% of the first term gross income (clause 4.2; Reference Schedule, item 4(2) and (3)).

    (c)A fee of $350 for a rent review or lease extension of an existing tenant (clause 4.2.3; Reference Schedule, item 4(4)).

    (d)Other fees incurred by Westpoint Realty when acting on behalf of Earlmist including for “court attendances, appeals to statutory assessments, negotiation of variations to tenancy agreements, presentation of the Owner in lease assignments, and the arrangement and supervision of major repair and maintenance items” (clause 4.3).

    (e)Other charges incurred by Westpoint Realty on behalf of and with the approval of Earlmist (clause 4.4).  

13. Earlmist provided us with four project cost summaries in support of these payments. Each has a breakdown of the costs in the tax invoices issued to Westpoint Realty. The costs are for marketing (with numerous sub-categories), selling, leasing and administration. They are titled ‘Westpoint Realty – Project Cost Summary’ and are for (TB 006.19):

    (a)Warnbro Commercial Centre Project dated 20 December 2005 for a total (including GST) of $720,500 (pdf 73).

    (b)Warnbro Shopping Centre Stage 2 Project dated 20 December 2005 for a total (including GST) of $821,150 (pdf 92).

    (c)Warnbro Commercial Centre Project dated 16 January 2006 for a total (including GST) of $578,050 (pdf 74).

    (d)Warnbro Shopping Centre Stage 2 Project dated 16 January 2006 for a total (including GST) of $642,400 (pdf 93).

    Has Earlmist established it made creditable acquisitions?

14. There are several issues and concerns raised by the documentation relied upon by Earlmist which, in our view, amount to Earlmist not having discharged its burden under s 14ZZK of the TAA. In short, there is too much in doubt for us to be satisfied on the evidence that Earlmist made creditable acquisitions as contended. We now explain our reasons for reaching this conclusion.

    Who made the creditable acquisitions?

15. The Commissioner submitted that at the relevant times Earlmist had no title or interest to the relevant lots comprising both developments – which calls into questions whether Earlmist had any role to play in the developments which would involve it making creditable acquisitions. In our view, a finding that Earlmist was not the owner would not inevitably be fatal because it is possible for creditable acquisitions to be made by an entity who is not the registered proprietor or who does not otherwise have an interest in the land if there was a larger arrangement that put the entity in a position to play a role in the project. The evidence does not clearly point to such an arrangement here, as we shall explain.

16. We think the better question is this: if creditable acquisitions were made (which we note the Commissioner did not concede), were they made by another entity in the Westpoint group, namely Westpoint Management who did in fact become the registered proprietor of the land, or a company called Bowesco Pty Ltd (ACN 008 915 357) (‘Bowesco’), instead of Earlmist?  

17. Mr Carey was a Director of Westpoint Management from 28 May 1996 to 21 December 2005. There were other Directors from time to time including Mr Gregory Nairn from 19 September 2005 to 18 October 2020, Mr Rundle from 23 October 2001 to 27 January 2006, and Mr Cedric Beck from 10 June 1998 to 9 September 2005 (TB 031.10).

18. Although we agree with Earlmist that the ownership of the land is not definitive for present purposes, it is helpful to consider the trail of ownership and control of these lots to ascertain Earlmist’s role and involvement in the development.

19. The original registered proprietor of the Original Warnbro Land was Cedar Woods Properties Ltd (TB 006.17, pdf 10-11). Earlmist purchased the land pursuant to a sale agreement dated 19 December 1996 (TB 015.1, pdf 3; A3/[9]). The contract of sale is incomplete, but the certificate of title shows the Earlmist Company became the registered proprietor on 6 March 1997 (TB 006.17, pdf 11).

20. However, on 30 January 1997, Earlmist entered into a ‘Joint Venture Agreement (Warnbro Fair)’ with Kingspoint Corporation Pty Ltd (ACN 076 607 219) (‘Kingspoint’) to develop Stage 1 of the land (TB 013.12). The agreement was made in contemplation of settlement of the purchase of the Original Warnbro Land by Earlmist and subject to Kingspoint paying $3,388,157.50 to Earlmist, after which time an undivided half interest would be transferred to Kingspoint. Thus, immediately after the land was transferred to Earlmist Company on 6 March 1997, it was transferred to Earlmist Company and Kingspoint as tenants in common in equal shares (TB 006.17, pdf 11).

21. The Joint Venture Agreement provided Kingspoint held its interest in the land as a bare trustee for Earlmist absolutely (clause 10.1; TB 013.12, pdf 20). This is consistent with Mr Carey’s evidence at the hearing that all but lot 913 (which was Stage 2 land) was held on trust by Kingspoint for Earlmist under the terms of the Joint Venture Agreement (transcript/107). We accept his evidence in this regard which is consistent with this documentation.

22. On 10 July 1997, the Western Australian Planning Commission approved a proposed plan of subdivision of the Original Warnbro Land to create lots 906 to 913. These lots included lot 909 (Stage 1), lot 913 (Stage 2), and lots 911 and 912 which were related to the Warnbro Commercial Land (TB 015.1, pdf 17). The plan of subdivision (diagram 94372) was approved on 24 December 1997 (TB 013.11).

23. A subsequent plan of subdivision (diagram 95368) approved on 16 July 1998 subdivided lot 912 into two separate lots, lots 914 and 915 (TB 006.51, pdf 210).

24. Towards the end of 1999, the Joint Venture completed the development on the Stage 1 Land (transcript/107).

25. On 8 November 1999, lots 909 and 913 were transferred to Westpoint Management (TB 110 and TB 111; transcript/107). Westpoint Management was the entity responsible for a managed investment scheme known as the Warnbro Fair Syndicate (TB 013.15).

26. Westpoint Management entered into an ‘Option agreement Warnbro Fair Syndicate’ with Westpoint Corporation on 31 August 1999. Under this agreement Westpoint Management granted an option to Westpoint Corporation (or its nominee) to purchase lots 909 and 913 in the period commencing on the fifth anniversary of the allotment of units in the Syndicate and expiring on the sixth anniversary (TB 013.16).

27. Mr Carey was a Director of Westpoint Corporation from 28 June 1989, and Mr Gregory Nairn was Company Secretary from 7 October 2005 (TB 006.48, pdf 3).

28. Mr Carey’s evidence in his statement dated 26 April 2016 was that in October 2005, Westpoint Corporation assigned the option to purchase lots 909 and 913 to Earlmist (A1/[97]). He produced a ‘Deed of Assignment of Option’ dated 7 October 2005 as evidence of this assignment (TB 013.17). We note the deed was not stamped until 19 October 2021 (TB 131, pdf 7).

29. However, in a statement dated 1 November 2021 (TB 142, A10/[17]-[19]), Mr Carey stated this evidence was incomplete, apologised for the “oversight”, and sought to add to his earlier evidence.

30. Mr Carey stated that around January 2006, the assignment of the option was cancelled. There is no deed of cancellation before the Tribunal. Mr Carey said it was replaced by an assignment of the option to another company that he controlled, Bowesco, in a ‘Deed of Assignment of Option’ dated 7 October 2005, stamped on 25 January 2006 shortly after it was executed (TB 142.7). Mr Carey said this deed was backdated to 7 October 2005 (transcript/123-125). Bowesco was not part of the Westpoint group. It was a company that held long-term income producing property assets for Mr Carey’s family (A10/[19]).

31. In summary, his evidence was that from the time the option was granted in August 1999, it was intended the option would be assigned to Earlmist once a commitment from Big W (a major retailer) was obtained, so that Earlmist could carry out the work on Stage 2 of the shopping centre. This, according to Mr Carey, led to Earlmist entering into the Agency Agreements and Management Agreements with Westpoint Realty in July 2005 and a building contract with Westpoint Constructions in September 2005.

32. However, according to Mr Carey in his 1 November 2021 statement, while doing some financial planning, he decided that on completion of the Stage 2 development Earlmist would sell the finished development to Bowesco to hold as a long-term income producing asset. He stated he received legal advice that it would be too costly to transfer the finished shopping centre to Bowesco on completion of the development by Earlmist. He said he received advice for Bowesco to own the land but for Earlmist to continue to carry out the development using the services of Westpoint Constructions and Westpoint Realty. Mr Carey’s evidence was that, following this legal advice, the assignment of the option to Earlmist was cancelled and replaced with the assignment of the option to Bowesco.

33. This scenario raises several issues and questions that are problematic for Earlmist.

34. Firstly, who was the developer of the Warnbro Fair Shopping Centre? Was it Earlmist or Bowesco? Mr Carey gave different evidence in other court proceedings about who the developer of the Warnbro Fair Shopping Centre was. Specifically, in Australian Securities and Investments Commission, Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 1242 (‘Richstar’) at [50] – [53], French J summarised Mr Carey’s evidence that as early as 2004, Mr Carey had chosen Bowesco to develop the Warnbro Fair Shopping Centre. At [50], French J stated:

    Mr Carey said he made the decision on behalf of Westpoint Corporation that the Warnbro Fair Option should be assigned to Bowesco. That is to say, he identified Bowesco as a development vehicle and, accordingly, the vehicle to whom the Option should be assigned in readiness for undertaking the business plan identified therein.

35. At the Tribunal hearing Mr Carey was asked why Earlmist continued to do the development, when from 2004, it was never going to be a development that Earlmist would own. His evidence was (transcript/126):

    Because Earlmist was developing the shopping centre. Bowesco didn’t have the capability to develop. So it was developing the shopping centre, and I wanted the ultimate ownership to be with Bowesco, that was an investment company that held long-term income producing property assets.

36. And further (transcript/127):

    My recollection – because Bowesco wasn’t able to do the development and it didn’t have the financial capacity to do the development. That’s my recollection and certainly what happened because once again I was running Bowesco. What I wanted was Bowesco to have the ultimate ownership of it. It couldn’t develop and that’s the reason that Earlmist was doing that.

37. Mr Carey was asked whether he had fabricated the evidence he gave to French J (transcript/127):

    MR DAVIES:              So when you said to French J that you identified Bowesco as a development vehicle, that was a fabrication?  

    MR CAREY:I’m just saying that, you know, at that time perhaps that’s something that he’s picked up, but I’m just saying, and my evidence now is consistent with what I told the court then, and that is that, you know, Bowesco is a long term holder of property assets, it’s got other property assets that it holds long term. It hasn’t developed property before and that’s why Earlmist was developing, Earlmist is a developer, it’s got the financial capacity to develop the second stage of the shopping centre.

38. The issue of who the developer was is further complicated by the absence of any agreement between the owner of the land, Westpoint Management, and Earlmist, that appoint Earlmist to carry out the development. The following exchange is relevant (transcript/126):

    MR DAVIES:              And you say that Earlmist is the one carrying out the development, but you are not able to point to any document that is an agreement between Westpoint Management – the owner of the land – and Earlmist, that has the consequence that the development of Westpoint Management’s land would be carried out by Earlmist?---

    MR CAREY:What I’m saying to you is, as I’ve said before, as the managing director of Earlmist, managing director of Westpoint Management, managing director of Westpoint Constructions, managing director of Westpoint Realty, in control of entities, that was what was agreed. And Earlmist was carrying out the development process with the assistance of Westpoint Constructions, Westpoint Realty, to facilitate the development of stage 2 of the shopping centre.

    MR DAVIES:              … Mr Carey, that’s a story, is it not, that’s been invented since 1 November?---

    MR CAREY: Mr Davies, I’m telling you of my own knowledge – I was there at the time, I was the decision maker of these entities, I was the architect of the project, I was the one directing the development process – that that is the case. That is my evidence.

39. This exchange highlights a fundamental problem for Earlmist and the other Applicants which we identified earlier in these reasons. Mr Carey controlled all the entities and made decisions for each of them – often following “negotiations” that he effectively conducted with himself. Where the documents are missing, incomplete or point to inconvenient conclusions, the Applicant in each case relies on Mr Carey’s recollections of what he said, did or intended to fill in gaps in the documentation. Those omissions and inconsistencies make it difficult to ascertain what was really going on, including whether any creditable acquisitions were made and the entity they were made to.

1. While we acknowledge Mr Carey’s evidence about “the way things were done” in the business, the terms of the Management Agreement do not suggest it was intended to operate retrospectively.

2. Mr Carey also referred to another agreement from approximately 2000 that Westpoint Realty would undertake the work (transcript/281):

   MR DAVIES:              But what is there in this agreement, Mr Carey, that authorises Westpoint Realty to charge for work carried out before it was appointed manager?

   MR CAREY:Because that was the agreement between Westpoint Realty and Westpoint Management from the beginning and that's why Westpoint Realty was carrying out that work.

   MR DAVIES:              So when you say from the beginning, when is that?

   MR CAREY:From when we contracted to buy the property in – yes, I think 2000.

   MR DAVIES:              So, you say there was another agreement on foot from 2000 onwards?

   MR CAREY:Well, that was the agreement I had with Westpoint management that I own because Westpoint management had no employees, the people that had to do the work.

   MR DAVIES:              And when you say it was the agreement you had, it was an agreement you had with yourself, was it?

   MR CAREY:Well, between those two entities. That’s why Westpoint Realty carried out that work.

3. In this evidence Mr Carey appears to be referring to another unwritten agreement which apparently embodied his own personal view or understanding of who would do the work. We do not accept this evidence as being sufficient to substantiate the amount for the leasing commission in the December 2005 tax invoice. For reasons we have already explained in relation to the other applications, we do not think such a self-serving and unverifiable account can be given much weight. Having regard to the evidence as a whole, we think there are too many doubts as to whether the leasing commission was payable, whether it was invoiced previously, and whether it was supported by the Management Agreement which was not retrospective.

4. We now turn to marketing and legal costs. The Commissioner submits there is no entitlement to recover those costs under the Agency Agreement or the Management Agreement (Respondent’s closing submissions, para [650]).

5. In his witness statement dated 5 July 2021 (A5, para [107]-[109]), Mr Carey referred to marketing documentation to demonstrate the nature of the marketing work that was carried out for the Market Street project. He stated the activities that fell within the marketing category are illustrated by the Marketing & Sales Plan for the Cinema City project (TB 30.37). For example, Mr Carey observed the project cost summary states that as at 20 December 2005, the sum of $285,116 (out of total marketing costs of $476,343) was incurred for telemarketing (TB 030.47). He referred to telemarketing being an important part of the development and significant costs being incurred in that area (A5, paras [57], [107]). We note by way of example that a telemarketing activity report for the week commencing 15 July 2002 shows over 1000 hours of telemarketing for the Bayshore, Market Street and Cinema City projects (TB 30.15, pdf 372).

6. Mr Carey also referred to various brochures and other materials to demonstrate marketing activity (A5, para [108]). These materials included: an ‘Introducer Pack’ which refers to the development as ‘Panorama Sky’ which included floorplans of apartments in the development (TB 030.55, pdf 109-152); 3D drawings of the development (pdf 156-162); a brochure for the ‘Panorama Sky Apartments’ (pdf 163-187); advertising materials for the retail space in the development which provided contact details of a person at Westpoint Realty (pdf 188-191); and another promotional brochure which includes a project summary (pdf 192-244, with the project summary at pdf 199). 

7. However, despite Mr Carey’s evidence about the marketing activities that took place, the difficulties for Market Street are similar to those we discussed above for Bayshore. There is no express term in the Agency Agreement that would entitle Westpoint Realty to charge the $476,343 of marketing costs shown in the project cost summary (TB 030.47). Clause 5.1 refers to the Agent being able to charge commission on the sale of each property calculated in accordance with the remuneration scale in Annexure B. Annexure B refers to the commission being four percent of the contract price for the property (TB 028.10, pdf 3 and 14).

8. The Commissioner also submitted there were no express terms in the Management Agreement that would entitle Westpoint Realty to recover marketing and legal costs. The Applicant did not clearly address this argument in its submissions, but we disagree with the Commissioner about the effect of the agreement on this point. We note Westpoint Realty’s duties under clause 3.2.3 include the responsibility for “marketing of and leasing the property” (TB 052, pdf 6). Clause 4.3 also permits other fees for acting on behalf of Westpoint Management to be paid to Westpoint Realty; and clause 4.4 states Westpoint Management shall be liable for any other costs and expenses paid or incurred by Westpoint Realty on behalf of Westpoint Management (TB 052, pdf 11). We acknowledge the express wording could be more specific, but we think it is sufficiently clear for us to accept marketing and legal fees were recoverable under clauses 4.3 and 4.4.   

9. Notwithstanding that entitlement, the documents before us do not show how the very specific amounts set out in the project cost summary were calculated. Ms Rigg’s evidence does not really assist in this regard. She was a junior marketing officer located in Perth and her evidence suggests she was primarily involved in projects located in Western Australia. She was aware of the Market Street project and had travelled to Melbourne and Sydney to meet with the national marketing team, but she was not responsible for billing or assessing the cost of the marketing work done (TB 017, para [6], [24]; transcript/382-383).  

   What was supplied by Westpoint Corporation?

10. As for Bayshore, the Commissioner submitted the tax invoice issued by Westpoint Corporation in December 2005 does not accord with the provisions of the DM Agreement dated 18 February 2003 (Respondent’s closing submissions, para [661]).

11. In his witness statement dated 17 December 2020, Mr Carey said Westpoint Corporation issued a tax invoice to Market Street for “professional fees rendered in respect of the Market Street project” on 20 December 2005. Mr Carey said these fees were authorised by the terms of the DM Agreement whereby Westpoint Corporations was engaged to provide management services for the project (A4, para [58]).

12. In his witness statement dated 5 July 2021, (A5, para [81]), Mr Carey stated the amount in the tax invoice was reflected in a Development Management Cost Summary dated 20 December 2005. This was a document titled ‘Westpoint Corporation – Development Management Cost Summary’ dated 20 December 2005 for the ‘60 Market Street’ project for a total of $4,533,127 (excluding GST) (TB 030.51). That document specified amounts for:

    (a)Item 1.1 – a $450,000 fee for “Issue of development approval”, calculated at 0.5% of $90,000,000.

    (b)Item 1.2 – a $450,000 fee for “Commencement of construction”, calculated at 0.5% of $90,000,000.

    (c)Item 2.1 – a $2,200,000 fee for “Achieving budgeted development approval”, calculated at 2% of $110,000,000.

    (d)Item 3.1 – a $918,127 fee for “Day to day management of the integrated property development process for this project from 01/07/2000 to 20/12/2005”.

    (e)Item 4.1 – a $515,000 fee for “Day to day management of marketing and selling process for this project from 01/07/2000 to 20/12/2005”.

13. As for Bayshore, our initial observation is that clause 3 and item 8 of the Schedule contemplate the categories of fees charged under items 1.1, 1.2 and 2.1.

14. The Commissioner submitted there is limited evidence to corroborate the amounts of the project costs ($90,000,000) or the project value ($110,000,000) that were referred to in the ‘Westpoint Corporation – Development Management Cost Summary’ of 20 December 2005. The Commissioner pointed out there is no reference to those sums in the DM Agreement (Respondent’s closing submissions, para [663]). Under cross-examination, Mr Carey agreed the DM Agreement did not assist with identifying the amount of the project costs (transcript/277). In his further witness statement dated 1 November 2021 (STB 142, para [16(a) and (b)]), Mr Carey explained the $90,000,000 of project costs was reflected in the trial balance of Market Street as at 31 December 2015 (TB 28.15) in the form of an entry for ‘WIP – Market Street’ showing a debit amount of $90,178,979.60. Mr Carey added the project value of $110,000,000 was “the value the project expected to receive on completion” comprised of $79,890,500 for the 280 hotel apartments and $30,972,000 for the residential apartments. Mr Carey also referred to a “pricing schedule” (STB 142/ [16(b)]) which is consistent with his evidence. We accept there is some evidence that corroborates the Applicant’s claims.

15. There are also doubts raised by the timing of the tax invoice. It was issued in December 2005 even though the entitlement to payment arose prior to that time. The date of the DM Agreement was 18 February 2003. Under cross-examination, Mr Carey agreed development approval had been issued (in 2001) and construction had commenced by the date of the DM Agreement (with the major construction work starting in 2003) (transcript/278 and 290). When asked about the delay in charging the commissions for the issue of development approval (which could have been charged in 2001) and the commencement of construction (which could have been charged in 2003), Mr Carey again referred to “a predetermined plan how to bring income to account” due to the prospective IPO (transcript/288 and 291). For the reasons we have previously expressed, we are not satisfied that the amounts would not have been invoiced when the liability to pay them arose in 2001 and 2003.   

16. As he did in Bayshore, Mr Carey said he relied on item 9 of the Schedule to the DM Agreement to authorise the payment of additional fees for “day to day management”, in items 3.1 and 4.1. As we have already stated, item 9 of the Schedule provided for a ‘Rate of Remuneration For extra Services’ to be determined “By negotiation” (TB 028.11, pdf 15). Again, he confirmed the contemplated negotiation was a decision he made alone (transcript/293). Other than the sums stated in items 3.1 and 4.1, there is no documentation before us to verify what was negotiated. 

17. Mr Carey confirmed items 3.1 and 4.1 of the cost summary related to a six-year period commencing from 1 July 2000 (when the property was purchased) to December 2005 (when the fees were charged). He agreed he was purporting to charge for those fees under the DM Agreement, even though it was only entered into in February 2003 (transcript/293). Mr Carey also stated the amounts in those items included amounts for salary and wages paid from July 2000 which totalled $918,127 (TB 041, para [26]; 041.13). However, with respect to his calculations, he stated, “this is not a contemporaneous document, it’s something that I’ve done recently to try and illustrate how that was done” (transcript/294). The fact the DM Agreement is not retrospective, and the calculations are not contemporaneous, further adds to the doubt as to how the amounts in these items were arrived at.

18. Even if we accept the evidence of Mr Carey in relation to the project costs and project value given there is some corroboration for those figures, questions remain over the services billed by Westpoint Corporation in this period. The DM Agreement was made in 2003 but work said to give rise to commissions had already been done. The DM Agreement was not retrospective, so it is not clear how those costs relating to earlier periods were properly included in the December 2005 tax invoice.  We also note there is limited evidence that corroborates Mr Carey’s claim he negotiated a right to charge day-to-day management fees under item 9, and it is unclear if the earlier work was previously invoiced. 

    Issues regarding the payment of the tax invoices via set-off

19. We observe there are similar issues regarding the payment of the tax invoices by way of a mutual set-off recorded in book entries as there were for the other applications.

20. Like the other applications, Market Street relies upon the following loan agreements and drawdown notices to substantiate a mutual set-off where the payments of the tax invoices were offset against the loans:

    (a)A loan agreement dated 1 July 2002 between Westpoint Management as trustee for Market Street Trust as Borrower and Westpoint Corporation as Lender for a commitment of $35,000,000 (TB 030.40).

    There is no evidence of any drawdown by Westpoint Management under this agreement.

    (b)A loan agreement dated 3 February 2003 between Westpoint Constructions as Borrower and Westpoint Management as trustee for Market Street Trust as Lender for a commitment of $30,000,000 (TB 030.41).

    On 20 December 2005 Mr Carey signed a drawdown notice stating Westpoint Constructions wished to draw $11,909,977 on 20 December 2005 under the loan agreement (TB 030.52). This was the GST inclusive amount of the tax invoice issued by Westpoint Constructions on the same date.

    (c)A loan agreement dated 3 February 2003 between Westpoint Realty as Borrower and Westpoint Management as trustee for Market Street Trust as Lender for a commitment of $20,000,000 (TB 030.42).

    On 20 December 2005 Mr Carey signed a drawdown notice stating Westpoint Realty wished to draw $5,306,862 on 20 December 2005 under the loan agreement (TB 030.53). This was the GST inclusive amount of the tax invoice issued by Westpoint Realty on the same date. 

    (d)A loan agreement dated 3 February 2003 between Westpoint Corporation as Borrower and Westpoint Management as trustee for Market Street Trust as Lender for a commitment of $10,000,000 (TB 030.43).

    Again, on 20 December 2005, Mr Carey signed a drawdown notice stating Westpoint Corporation wished to draw $4,986,439 on 20 December 2005 under the loan agreement (TB 030.54). This was the GST inclusive amount of the tax invoice issued by Westpoint Corporation on the same date.

21. Each of these loan agreements was signed by Mr Carey as Director and Mr Rundle as Company Secretary. None of the loan agreements are stamped.

22. Again, like the other applications, Market Street relies upon an incomplete handwritten journal entry, with an “effective journal date” of 20 December 2005, to substantiate that a set-off occurred (TB 028.15, pdf 2). The entity is stated as “(46) 60 Market Street”. Like the other applications, the “journal number”, “date prepared”, “prepared by”, “entered by”, “authorised by” and “date entered” fields are blank. The “Journal Details” box had been completed to state, “Transactions to reduce loan by payment of invoices”.  

23. Market Street also relies on a trial balance as at 31 December 2005 to show the debiting and crediting of the loan amounts to pay the invoices (TB 028.15, pdf 1). That trial balance shows:

    (a)A debit of $20,184,799 for “WIP – Market Street”, which Market Street submits comprises the GST exclusive amounts payable by Market Street to Westpoint Constructions, Westpoint Realty and Westpoint Corporation in respect of the tax invoices dated 20 December 2005 (opening submissions, para [28(a)(i)] of Annexure 2 Market Street).

    (b)A debit of $2,018,479 for “GST Paid”, which Market Street submits is the GST payable under each of the tax invoices (opening submissions, para [28(a)(ii)] of Annexure 2 Market Street).

    (c)A credit of $11,909,977 for “Loan – Westpoint Constructions”, which Market Street describes as the reduction of the loan in the amount necessary to pay the tax invoice issued by Westpoint Constructions (opening submissions, para [28(a)(iii)] of Annexure 2 Market Street).

    (d)A credit of $5,306,862 for “Loan – Westgem Unit Trust”, which Market Street describes as the reduction of the loan in the amount necessary to pay the tax invoice issued by Westpoint Realty (opening submissions, para [28(a)(iv)] of Annexure 2 Market Street).

    (e)A credit of $4,986,439 for “Loan – Westpoint Corporation P/L”, which Market Street describes as the reduction of the loan in the amount necessary to pay the tax invoice issued by Westpoint Corporation (opening submissions, para [28(a)(v)] of Annexure 2 Market Street).

24. There are no other financial records of Market Street before us, save for the tax invoices, the incomplete journal entry, and the trial balance. 

25. As with the other applications, there are no corresponding accounts for Westpoint Corporation, Westpoint Constructions or Westpoint Realty AFT Westgem that evidence a mutual set-off, nor any evidence that these companies accepted the mutual set-off by way of any express or implied agreement. We agree with the guidance in GSTD 2004/4 suggesting those features would ordinarily be present.

26. The Westpoint group was on the verge of collapse when the tax invoices were issued in late 2005. As we mentioned above in relation to Bayshore and the other applications, winding up proceedings against Westpoint Corporation were commenced in the Federal Court on 19 December 2005 (TB 031.4). Receiver managers and an administrator were appointed on 24 January 2006. A liquidator was subsequently appointed on 16 February 2006 (TB 012.44, pdf 5). A receiver was appointed to Westpoint Constructions on 2 February 2006, followed by a court appointed liquidator on 22 February 2006 (TB 012.36, pdf 5). On 20 April 2006 receivers and managers were appointed to Westpoint Realty, followed by liquidators being appointed on 13 April 2007 (TB 012.38, pdf 6).  

27. Again, like the other applications before us, the reports as to affairs made by the receivers and managers and liquidators are inconsistent with the inter-company debts and mutual set-offs alleged by Market Street.

28. A report by the administrators of Westpoint Realty dated 2 February 2007 listed related party loans. Neither Westpoint Management nor Westpoint Management as trustee for the Market Street Trust were listed as having monies owed to them under related party loans (TB 012.43, pdf 17).

29. A report as to affairs for Westpoint Constructions dated 11 August 2006, which was verified by Mr Rundle on 9 August 2006, stated “60 Market Street Trust – Receiver” owed $1,455,679 (TB 031.A2, pdf 1, 3 and 7). In contrast, the trial balance for the Market Street Trust shows that as at 31 December 2005, after the credit of $11,909.977, the balance owing to Westpoint Constructions was $13,596,365.99 (TB 028.15).

30. A report as to affairs for Westpoint Corporation dated 27 February 2006 by the official liquidator, certified as being true by Mr Rundle, Mr Carey and Mr Nairn on 23 February 2006, stated there was an amount owing of $16,458,041.56 in connection with “Loan – 60 Market Street Trust” with the explanation “no surplus likely from project” (TB 031.A1, pdf 1, 5 and 9). This sum is substantially different from the amount of the loan stated in the trial balance for the Market Street Trust as at 31 December 2005, which shows that after the credit of $4,986,439, the balance owing to Westpoint Corporation was $6,458,041.85 (TB 028.15).

31. These reports are inconsistent with the amounts of inter-company debts and mutual set-offs alleged by Market Street.

32. Further, the GST reporting for Westpoint Constructions and Westpoint Realty are inconsistent with the creditable acquisitions Market Street is claiming to have made because the BASs of these entities do not show corresponding taxable supplies.

33. As we mentioned above for Bayshore, Westpoint Corporation did not lodge a BAS for December 2005 (TB 019.5, pdf 1). Westpoint Constructions lodged a BAS on 2 March 2006 with a net amount of nil and no taxable supplies for the December 2005 tax period (TB 012.32). Westpoint Realty lodged a BAS for the period 1 October 2005 to 31 December 2005 on 27 February 2006 which reported total sales of $302,711 and non-capital purchases of $785,046 (TB 012.34). 

1. We therefore agree with the Commissioner’s submission that these BASs do not show taxable supplies that correspond to the acquisitions which Market Street claims to have made.

2. The Commissioner makes a similar submission here to the one made in relation to Silkchime and Bayshore. That is, Westpoint Realty’s BAS was lodged on 27 February 2006 before the receiver and manager was appointed to Westpoint Realty on 20 April 2006 (TB 012.38, pdf 1). Again, even if we accept Mr Carey’s evidence that the books of Westpoint Constructions and Westpoint Realty were seized by ASIC in January 2006, there is still a lack of any corroborating evidence from the perspective of Westpoint Corporation, Westpoint Constructions and Westpoint Realty that they made taxable supplies to Market Street.  

   Conclusion for Market Street

3. For the reasons we have outlined above, we find Market Street has not established on the evidence that it made creditable acquisitions as contended from Westpoint Constructions, Westpoint Realty and Westpoint Corporation. The doubts we have about this application are similar to those we expressed for Cinema City and Bayshore. In summary, our reasons include:

   (a)As for Bayshore, there is significant doubt as to whether Heca Nominees was validly appointed as an additional trustee to the Market Street Trust. None of the trust assets were ever transferred into the joint name and the alleged trustees never acted jointly. Heca Nominees did nothing as a trustee other than to notify and pursue GST claims with the Commissioner, and there is no evidence Heca Nominees was recognised as a trustee by any third party.

   (b)There is considerable doubt as to whether the Market Street Trust continued to exist after Westpoint Management was deregistered. The reports to creditors prepared by the liquidators clearly refer to the winding up of the Market Street Trust and distribution of its assets to creditors. Other than the trial balance, incomplete journal entry and tax invoice, there are also no financial records, including recent financial records or books of account, that show the trust fund continues to exist. In all the circumstances, we are not satisfied the trust continues to exist. 

   (c)With respect to whether taxable supplies were made to Market Street by Westpoint Constructions, we found the evidence was consistent with Westpoint Construction’s entitlement to the amounts invoiced.

   (d)With respect to any taxable supplies being made by Westpoint Realty, we also found there was considerable doubt as to what was supplied by Westpoint Realty as trustee for the Westgem Trust. It was unclear whether deposits (which would have entitled Westpoint Realty to invoice commission under 5.2 of the Agency Agreement) were paid and if so, when they were paid. This was because the Agency Agreement, which was not expressed to be retrospective, was entered into on 1 June 2002 and yet many of the contracts of sale were entered into prior to that time. The uncertainty was further exacerbated by Mr Carey’s reference to an unwritten agreement that he made with himself which he first referred to under cross-examination. We found Mr Carey’s evidence of this other agreement was insufficient to supplement the Agency Agreement, or to otherwise to substantiate an entitlement for Westpoint Realty to charge for work under the subsequent Agency Agreement. The evidence also raised uncertainty about whether sales commission had been previously invoiced. We also did not think the documentation (that is, the Management Agreement) entitled Westpoint Realty to charge a leasing commission upon entry into the Development Agreement because that document fell short of being an agreement for lease. Even if it could be so regarded, the Management Agreement was not retrospective and so we are not satisfied it created an entitlement to any commission that arose prior to it being entered into. Again, Mr Carey referred to another unwritten agreement to buttress his evidence, but we did not think that evidence was sufficient to substantiate the leasing commission. With respect to marketing and legal costs, despite Mr Carey’s evidence about the marketing activities that took place and our finding that the recovery of those costs was possible under the Management Agreement, the documents before us, and the evidence of Ms Rigg, did not show how the specific amounts for marketing and legal fees set out in the project cost summary were calculated.

   (e)The evidence also raises doubt about what was supplied by Westpoint Corporation under the DM Agreement. There was limited supporting evidence as to the amount of the project costs and the project value. Even if we accept Mr Carey’s evidence as to how these sums were arrived at, further doubts are raised by the delay (until December 2005) in invoicing the commissions under the DM Agreement, which were itemised in the Development Management Cost Summary. An entitlement to invoice the first two commissions in that summary (for obtaining development approval and for the commencement of construction) arose in 2001 and 2003, prior to the Development Agreement being made. The DM Agreement is not expressed to be retrospective. Mr Carey also relied upon an undocumented agreement he negotiated himself under item 9 of the Schedule to the DM Agreement to support the final two amounts of commission in the cost summary (for the “day to day management” of the integrated property development process and the management of marketing and selling). However, these included costs incurred for the period from 1 July 2000 to 20 December 2005, approximately three and a half years of which preceded the DM Agreement. There is no evidence that work which preceded the DM Agreement was not previously invoiced. We were also unconvinced by Mr Carey’s explanation that he was deferring charging amounts that could be invoiced as early as July 2000 to December 2005 because he was bringing income to account in preparation for an upcoming IPO.

   (f)There are similar issues with the evidence concerning set-off that we found for the other applications. These included the incomplete handwritten journal entry, a lack of evidence as to whether there was a mutual set-off or that the related companies agreed to the set-off arrangement, a lack of evidence of mutual book entries, and inconsistent reports as to affairs from the receivers and managers and liquidators of Westpoint Constructions, Westpoint Realty and Westpoint Corporation.

   (g)Similarly, the failure to stamp key documents including the Building Contract, Agency Agreement, Management Agreement and DM Agreement raise doubts about provenance, adding to our overall concerns. 

4. Again, there are so many doubts raised by the evidence that we find Market Street has not discharged the burden of proving that the net amount for the December 2005 tax period is less than zero. Specifically, Market Street has not established on the evidence that it made creditable acquisitions under s 11-5 of the GST Act from Westpoint Constructions, Westpoint Realty and Westpoint Corporation whereby Market Street was entitled to input tax credits for GST of $1,082,725, $482,442, and $453,312 (totalling $2,018,480), in whole or in part, for the December 2005 tax period. It follows Market Street has not discharged the burden of proving the assessment was excessive or otherwise incorrect and what it should have been.

5. Consequently, we find the Market Street Reviewable Decision should be affirmed.

   CONCLUSION

6. For the reasons we have explained in relation to all five developments, we are not satisfied each Applicant has discharged its onus of demonstrating the assessment was excessive or otherwise incorrect and what the assessment should have been. We are grateful to the parties for their assistance in the laborious forensic process of reconstructing the affairs of the Applicants and the Westpoint group. Ultimately, given the state of the evidence – particularly the incomplete and occasionally confusing and contradictory picture painted by the documents, and our hesitations over the reliability of Mr Carey’s assistance – we were not persuaded the Applicants met their burden under s 14ZZK(b) of the TAA. In those circumstances, each of the objection decisions under review must be affirmed.

   DECISIONS

7. The Tribunal affirms the: Earlmist Reviewable Decision; Silkchime Reviewable Decision; Cinema City Reviewable Decision; Bayshore Reviewable Decision; and the Market Street Reviewable Decision.

I certify that the preceding 662 (six hundred and sixty-two) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe and Senior Member Dr M Evans-Bonner

.....................[SGD]................................

Associate

Dated: 28 April 2023

Date of hearing:  3 November 2021 to 5 November 2021; 15 November 2021 to 18 November 2021; 22 February 2022

Representative for the Applicant:             Mr C Sievers of counsel instructed by Mony de Kerloy

Representative for the Respondent:         Mr G Davies KC and Ms M Baker of counsel instructed by Jackson MacDonald

ANNEXURE A

·Tab 13 Tribunal Book: Witness Statement of N Carey [26-04-2016] (Exhibit A1);

·Tab 14 Tribunal Book: Witness Statement of N Carey [17-12-2020] (Exhibit A2);

·Tab 15 Tribunal Book: Witness Statement of N Carey [05-07-2021] (Exhibit A3);

·Tab 29 Tribunal Book: Witness Statement of N Carey [17-12-2020] (Exhibit A4);

·Tab 30 Tribunal Book: Witness Statement of N Carey [05-07-2021] (Exhibit A5);

·Tab 41 Tribunal Book: Witness Statement of N Carey [31-08-2021] (Exhibit A6);

·Tab 44 Tribunal Book: Document omitted from affidavit dated [31-07-2021], paragraph [16] (Exhibit A7);

·Tab 52 Tribunal Book: Document omitted from affidavit dated [31-07-2021] [MS-AD4], paragraph [16] (Exhibit A8);

·Tab 131 Tribunal Book: Witness Statement of N Carey [22-10-2021] (Exhibit A9);

·Tab 142 Supp. Tribunal Book: Witness Statement of N Carey [01-11-2021] (Exhibit A10);

·Declaration from N Carey, G Rundle and G Nairn that they made best and reasonable endeavours to fill out the RATA for Westpoint Corporation Pty Ltd dated 23/02/2006 (Exhibit A11);

·Cinema City Sample Contract dated 10 November 2005 (Exhibit A12);

·Bundle of correspondence concerning residential apartment contract R9.09 between Westpoint Realty dated 7/11/05; 8/11/05; 10/11/05; 11/11/05; 14/11/05 (Exhibit A13);

·Westpoint Corporate Plan 2005/2006 (Exhibit A14);

·Tab 18 Tribunal Book: Witness Statement of G Nairn [15-07-2021] (Exhibit A15);

·Tab 17 Tribunal Book: Witness Statement of S Rigg [13-7-2021] (Exhibit A16);

·Witness Statement of J Low [13-07-2021] (Exhibit A17); and

·Tab 32 Tribunal Book: Witness Statement of C Quirk [21-07-2021] and attachments: 032.1-032.33 (Exhibit A18).